Knowing whom you hire to do work for you, as a sub-contractor is one of the most important business decisions you make today. Why, because your sub-contractor is representing YOU to your customer. YOU the general contractor are responsible for the work a sub-contractor does for you. YOU are responsible to correct any problems created by your sub-contractors.

Let me tell you a true story.

Bob a general contractor who has been in business 26 years and has hundreds of projects under his belt constructed and finished a house for his customers Mr. And Mrs. Smith in 1996. In March of 2001 five years later the house caught fire and burnt to the ground. The Smith's homeowners insurance company after investigating how the fire started, stated the proximate cause of the fire was faulty wiring. The electrical sub-contractor Jim who Bob had hired to do this job was brought into the suit. Regrettably Jim retired two years ago and no longer had insurance to protect him or Bob. The Smith's homeowners insurance company is suing Bob the General Contractor for Jim's Construction Defect! Bob did not do the work, but he hired the sub-contractor Jim. Bob's insurance company has cancelled Bob for hiring an uninsured sub-contractor. Even though Jim the sub-contractor was insured at the time he did the job. Bob lost his general liability insurance and had to look for another insurance carrier to cover his business. The cost of his new insurance is 153% higher than what he previously paid. The moral of the story is:

MAKE SURE YOUR SUB-CONTRACTORS ARE INSURED! If you are doing business with a sub-contractor year after year, make it a habit to ask for current certificates of insurance. Make sure you are named as an additional insured. Also check that his limits of liability match yours. In other words if you carry $1,000,000.00 limit than your sub-contractors need to carry the same limits as you. Some insurance companies are considering undocumented sub-contractors (no certificates of insurance on file) as employees. These companies are using the amount you paid the sub as payroll. The cost of your general liability is determined on your payroll. The cost of your insurance will increase dramatically if this occurs.

Before you hire a sub-contractor make sure he is licensed with the your states Construction Contractors Board. Make sure his license is up-to-date. You can check on this by going to CCB's website. If you have the sub-contractor's license number you can enter it and check to see if his status is current.

While you are at the CCB's web site you can also check for any complaints logged against the sub-contractor. You do not want to hire someone who will cause you problems.

Make sure your sub-contractor meets all criteria for being an independent contractor and is not an employee. If you do not have the eight-point check list to make sure you are hiring an independent contractor call us for help.

Ask to see examples of the sub-contractors work. Ask for referrals from other general contractors who have used him in the past.

Have a written contract between you and the sub-contractor as to what you expect from him and how you are going to pay him. Make it understood who is responsible for correction of errors. You or the sub­contractor. This will protect both parties.

Have a written list of material used. If there are any changes make sure you, the homeowner and the sub-contractor signs off on the changes.

Do a walk through of the site make sure your sub-contractors know what you want done. Leave nothing to guess work. Remember you will pay for his bad decisions. You are the general contractor you are responsible.

Do not let your customers deal with your sub-contractors. As a general contractor you are responsible for any problems arising from your sub-contractors.

After the sub-contractor has finished his job do a walk through and inspection of his work with your sub-contractor. Bring a check off list with you. Make a list of items that need to be repaired or re­done. If you are working with a reputable sub-contractor he will be happy to make these repairs. Re-inspect after the repairs have been made. Make sure you, the customer and your sub-contractor signs off they are completely satisfied with the repairs.

If the sub-contractor has employees make sure his employees are well trained. Ask to see copies of certificates or licenses. Make sure the sub-contractor is carrying Workers Compensation Insurance. You do not want to become the responsible party if this person is hurt on your job site and the sub has no insurance. Ask for a certificate of insurance showing workers compensation is currently in place.

Make sure you document all your dealings with a sub-contractor. This includes contracts, list of repairs and their costs, current copies of certificates of insurances. Document all phone conversations and what was said. Set up a file and keep all material for no less than 10 years after the completion of the project. You never know when this documentation could save you millions.

Last but not least only work with sub-contractors with whom you have a good relationship. Someone who respects the position you are in today's legal environment. If you cannot openly communicate with this person it's not worth risking your business to do business with them.

$$$ Million Dollar Bonus Tip $$$

The same thing could happen to you as did to Bob. If you retire you are legally responsible for the last thing you built for a period of ten years. This is the law in the state of California. Continue to carry General Liability Insurance for 10 years after you complete your last job. You do not want to watch your retirement savings disappear because you are in court without the financial back up of a large insurance company and their lawyers. Your insurance premiums will pay for the insurance company to defend you in case your prior customer sues you for a construction defect. Do Not Roll The Dice and Hope You Will Not Be Sued. In this area of law there is just too much easy money to be made by the lawyers. You are an easy target!